The US Dollar (USD) Index continued its bullish trend on Thursday, reaching its highest level in over two years early Friday before entering a consolidation phase. Investors are awaiting key economic data later in the day, including the November Personal Consumption Expenditures (PCE) Price Index from the US and the European Commission’s preliminary Consumer Confidence Index for December.
A hawkish shift in the Federal Reserve’s Summary of Economic Projections sparked a rally in US Treasury bond yields, boosting the USD in the latter half of the week. Positive US economic data further supported the currency on Thursday. However, as concerns about a potential US government shutdown grow ahead of the holiday season, investors adopted a more cautious approach on Friday, with US stock index futures losing between 0.1% and 0.4% at the time of press.
Meanwhile, the Bank of England (BoE) left its bank rate unchanged at 4.75% following its December meeting. However, three members of the Monetary Policy Committee (MPC) unexpectedly voted for a rate cut, putting downward pressure on the Pound Sterling (GBP). The GBP/USD pair dropped over 0.5%, touching its lowest point since May below 1.2480 before staging a technical correction and trading around 1.2500 early Friday. UK Retail Sales data for November showed a modest 0.2% month-on-month rise, missing the expected 0.5% increase.
In China, the People’s Bank of China (PBoC) kept the one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.10% and 3.60%, respectively, with minimal reaction from the Australian Dollar (AUD/USD), which remained range-bound below 0.6250.
The USD/JPY pair gained over 1.5% on Thursday after the Bank of Japan (BoJ) refrained from committing to further policy tightening. The pair reached a multi-month high near 158.00 in the Asian session but retreated to 157.00 in European trading. Japan’s Finance Minister, Katsunobu Kato, expressed concern over the recent fluctuations in the foreign exchange market, warning of appropriate measures against excessive moves.
EUR/USD, after suffering significant losses on Wednesday, managed to stabilize on Thursday, ending the day nearly unchanged. The pair continues to trade below 1.0400 despite small daily gains early Friday.
Gold prices held steady around $2,600, supported by a risk-averse market environment despite the broader strength of the US Dollar.
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